Price improvement crossing system

ABSTRACT

A method provided for matching a buy order having a buy order price and a sell order having a sell order price that includes the step of determining if the buy order price is not less than the sell order price. Next, an NBBO price range is identified and it is determined whether the buy order price and the sell order price are within the NBBO range. A midpoint between the buy order price and the sell order price is then calculated. Finally, the buy order and the sell order is matched at the midpoint if the buy order price is not less than the sell order price and the buy order price and the sell order price are within the NBBO range.

CROSS-REFERENCE TO RELATED APPLICATION

This application is a divisional application of U.S. patent applicationSer. No. 09/870,325, filed May 30, 2001, and entitled “Price ImprovementCrossing System,” the entire contents of which is hereby expresslyincorporated by reference.

BACKGROUND OF THE INVENTION

The following invention relates to a system and method for matching buyand sell orders in securities and, in particular, to a system and methodof improving the speed and price at which such securities transactionstake place while maintaining the confidentiality of any given buy andsell order.

Buyers and sellers of securities have many avenues through which totrade. Depending on the type of security, a trade between a buyer andseller may occur on one of several markets including the New York StockExchange (“NYSE”), the American Stock Exchange (“AMEX”), the NationalAssociation of Securities Dealers Automated Quotations system (“NASDAQ”)or via any number of ATSs, including electronic communications networks(“ECNs”), that match buyers and sellers. Buyers and sellers generallypresent their orders for execution on one of these markets through abroker associated with a financial institution that communicatesdirectly with the markets. Thus, financial institutions act as aninterface between customers desiring to trade in a particular securityand the financial markets in which the trade will be executed.

In addition to servicing order flow on behalf of its customers, afinancial institution may also trade in the financial markets on its ownbehalf, for example, by engaging in program trading or trading to managethe financial institution's overall risk. Orders placed on behalf of thefinancial institution's proprietary accounts are also forwarded to thefinancial markets for execution.

Although access to the financial markets is vital for a financialinstitution to service its customer and proprietary order flows, solereliance on the financial markets for order execution is sometimesinefficient. First, financial institutions incur a fee for eachtransaction executed in the financial markets on its behalf. In manycases, however, the financial institution will pay this transaction feeeven though it controls both the seller's and buyer's orders in aparticular transaction. In such a case, the financial institution couldhave eliminated the fees associated with such a transaction by not usingthe financial markets to execute the transaction and matching the buyerand seller internally. Aside from unnecessary transaction costs, routingorders externally for execution often results in slower execution timesas opposed to orders that are matched within the financial institutionitself.

Customers often place various restrictions on orders placed with afinancial institution. For example, if an order to transact in asecurity at a particular price is designated by a customer as a “held”order, then the trader receiving the order is subject to certainobligations with respect to executing such an order. There are two typesof held orders. With a held market order, the trader is obligated tobuy/sell the particular security at the prevailing market price asquickly as possible. With a held limit order, the trader is obligated toattempt to buy/sell the security at the limit price or better. Incontrast, if the customer designated the order as a “not held” limitorder, then the trader may buy/sell the security at the limit price orbetter, and within a time period subject to the trader's discretion.

A financial institution is obligated to seek the best execution for aparticular customer order. To meet its obligation, the financialinstitution is generally not limited as to the forum in which it maytransact and generally routes the order to any of a number of externalmarkets in order to get the best execution price.

In contrast, orders may have restrictions with respect to what forum thefinancial institution may use to transact. For example, if an order isdesignated by a customer as a “cross only” order, then the financialinstitution cannot route these orders to external financial markets forexecution and must instead attempt to execute the trade using anothercustomer of the financial institution as a counterparty. If an order isdesignated as a “do not represent” order, then the financial institutioncannot show interest to potential counterparties. A customer maydesignate an order as “cross only” and “do not represent” so that thecustomer's intentions to transact in the security do not affect themarket for the particular security. In this way, customers can havetheir orders executed by the financial institution while stillmaintaining confidentiality.

Customers placing “cross only” and “do not represent” orders, however,have to weigh the benefits of maintaining order confidentiality againstexecution price and speed. Because the financial institution cannotpresent “cross only” and “do not represent” orders to the publicmarkets, these orders may not be executed as quickly or at as good aprice as orders exposed to external markets.

Prior art systems exist for matching buy and sell orders in a particularsecurity. These systems, also called crossing networks, match buyers andsellers using any of a number of algorithms. For example, POSIT, acrossing network owned by ITG, Inc., matches buyers and sellers at themidpoint of the prevailing national best bid and offer (the “NBBO”) inNASDAQ or CQS. For example, if the POSIT system has a buyer desiring tobuy XYZ Corp. stock at a limit of $25 a share and a seller wishing tosell XYZ Corp. shares at a limit of $20, then POSIT will execute atransaction between the buyer and seller at a price which is themidpoint of NBBO. Therefore, if NBBO is $23 bid by $25 offer, then themidpoint of NBBO is $24 and the match between the buyer and selleroccurs at $24. If, however, NBBO is $22 bid by $24 offer, then themidpoint of NBBO is $23 and the match between the buyer and seller is at$23. If, however, the midpoint of NBBO is $26, then the POSIT systemwill not execute a trade between the buyer and seller. Thus, because thePOSIT matching algorithm only executes trades at the midpoint of NBBO,it does not necessarily provide an opportunity to trade even if buyerand seller would otherwise match.

Another prior art strategy used to match buyers and sellers, one that isused by several ECNs, is to trade at the bid/offer price of the firstcounterparty to post an order to buy/sell a particular stock to the ECN.For example, if a buyer posts a bid to buy XYZ Corp. shares at $25 pershare and subsequently a seller posts an offer to sell those shares for$22 each, then the transaction favors the seller and occurs at $25.Conversely, if a seller posts an offer to sell XYZ Corp. shares at $22per share and subsequently a buyer posts a bid to buy those shares for$25 each, then the transaction favors the buyer and occurs at $22. Thus,under this algorithm, the second party to a transaction is favored tothe detriment of the first party.

Yet another prior art strategy for matching buyers and sellers exists inwhich trades in a particular security between buyers and sellers occurat the NYSE closing price for the security. This approach, used in theInstinet's aftermarket system, does not offer a price improvement toeither buyer or seller.

Accordingly, it is desirable to provide a method and system thatimproves the execution speed and price at which customer buy and sellorders transact while maintaining the confidentiality of any designatedorder.

SUMMARY OF THE INVENTION

The present invention is directed to overcoming the drawbacks of theprior art. Under the present invention, a method is provided formatching a buy order having a buy order price and a sell order having asell order price. The method includes the step of identifying an NBBOprice range and determining whether the buy order price and the sellorder price are within the NBBO range. Next, it is determined whetherthe buy order price is not less than the sell order price. A midpointbetween the buy order price and the sell order price is then calculated.Finally, the buy order and the sell order are matched at the midpoint ofthe buy order price and the sell order price if the buy order price isnot less than the sell order price and the buy order price and the sellorder price are within the NBBO range. Thus, a transaction occurs at aprice at which both the buyer and seller may receive a price improvementover their original buy order price and sell order price, respectively.

In an exemplary embodiment, where the NBBO range includes a best offerprice and a best bid price, and where the buy order price is above thebest offer price and the sell order price is within the NBBO range, themethod of the present invention includes the step of changing the buyorder price to a changed buy order price that is equal to the best offerprice. Next, a midpoint between the changed buy order price and the sellorder price is calculated. Finally, the buy order and the sell order arematched at the midpoint if the changed buy order price is not less thanthe sell order price.

If the sell order price is below the best bid price and the buy orderprice is within the NBBO range, the method includes the step of changingthe sell order price to a changed sell order price that is equal to thebest bid price. Next, a midpoint between the changed sell order priceand the buy order price is calculated. Finally, the buy order and thesell order are matched at the midpoint if the buy order price is notless than the changed sell order price.

If the buy order price is above the NBBO offer or the sell order isbelow the NBBO bid, the method includes the step of changing the buyorder price to a changed buy order price that is equal to the best offerprice and changing the sell order price to a changed sell order pricethat is equal to the best bid price. Next, a midpoint between thechanged buy order price and the changed sell order price is calculated.Finally, the buy order and the sell order are matched at the midpoint.

In another exemplary embodiment, the buy order is for a first shareamount and the sell order is for a second share amount and the step ofmatching the buy order and the sell order includes the step of matchingthe buy order and the sell order up to the first share amount if thefirst share amount is less than the second share amount and matching thebuy order and the sell order up to the second share amount if the secondshare amount is less than the first share amount.

In yet another exemplary embodiment, a second buy order having a secondbuy order price above the midpoint and less than the buy order price isincluded and the step of matching the buy order and the sell orderincludes the steps of calculating a cross point equal to the second buyorder price plus an increment and matching the buy order and the sellorder at the cross point.

In still yet another exemplary embodiment, the buy order is selectedfrom a plurality of buy orders each having a buy order price and the buyorder price of the buy order is greater than the buy order price of anyother of the plurality of buy orders.

In another exemplary embodiment, a second buy order having a second buyorder price equal to said buy order price of the buy order is includedand the buy order is an agency order and the second buy order is aproprietary order.

In yet another exemplary embodiment, the second buy order price equalsthe buy order price of the buy order, the buy order and the second buyorder are either both agency orders or proprietary orders and the buyorder has an order time and the second buy order has a second order timesuch that the order time is prior to the second order time.

In an exemplary embodiment of the present invention, a crossing networkfor matching the buy order and the sell order is included and receives aplurality of pass-through orders and a plurality of passive orderswherein the buy order and the sell order are included in the group ofthe plurality of pass-through orders and the plurality of passiveorders. Thus, because order flow through the crossing network isincreased as a result of the passive and pass-through orders enteringthe crossing network, the execution speed for both passive andpass-through orders are increased while still maintaining theconfidentiality of the passive orders.

In another exemplary embodiment, an order router is included and is incommunication with the crossing network. The order router is incommunication with at least one external order destination and receivesat least a portion of the pass-through orders from the crossing networkand forwards the at least a portion of the pass-through orders to the atleast one external order destination. In yet another embodiment, the atleast a portion of the pass-through orders includes orders that have notbeen matched by the crossing network. Thus, those pass-through ordersthat are not matched by the crossing network are forwarded to anexternal order destination, for example, the NYSE or an ECN, forexecution.

Accordingly, a method and system is provided that offers overallimprovement in the execution price and speed at which buy and sellorders transact while maintaining the confidentiality of any designatedorder.

The invention accordingly comprises the features of construction,combination of elements and arrangement of parts that will beexemplified in the following detailed disclosure, and the scope of theinvention will be indicated in the claims. Other features and advantagesof the invention will be apparent from the description, the drawings andthe claims.

DESCRIPTION OF THE DRAWINGS

For a fuller understanding of the invention, reference is made to thefollowing description taken in conjunction with the accompanyingdrawings, in which:

FIG. 1 is a block diagram of a system for improving the execution priceand speed of transactions in accordance with the present invention;

FIG. 2 is a flowchart of a price improvement matching algorithm includedin the system of FIG. 1; and

FIG. 3 is a flowchart of a price improvement matching algorithm includedin the system of FIG. 1 according to an exemplary embodiment.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS

Referring now to FIG. 1, there is shown a block diagram of a system 1for improving the execution price and speed of transactions inaccordance with the present invention. System 1 includes a crossingnetwork 3 that receives an order flow of securities such as, by way ofexample, equity securities, and matches buy and sell orders contained inthe order flow. Crossing network 3 typically consists of softwareexecuting on a computer that electronically receives the order flow anddetermines which of the orders contained therein are suitable formatching. Once orders that are suitable for matching are identified,crossing network 3 executes a trade between them using known techniques.

Crossing network 3 receives buy and sell orders from a passive orderflow source 5 and a pass-through order flow source 7. Passive order flowsource 5 includes orders that are designated as “not held,” “cross only”and “do not represent” orders thereby indicating that these orders areto be kept confidential. If crossing network 3 is operated by afinancial institution, then passive order flow source 5 may includeorders from customers that the financial institution is required to keepconfidential even from traders and salespersons within the financialinstitution. Passive order flow source 5 may also include proprietaryorders (i.e., orders on behalf of the financial institution) that thefinancial institution does not want to route externally. Pass-throughorder flow source 7 may include customer orders that were not designatedas confidential as well as unrestricted proprietary orders for which thebest execution price is desired. Upon receiving the buy and sell ordersfrom passive order flow source 5 and pass-through order flow source 7,crossing network 3 attempts to match the buy orders and sell ordersaccording to the matching procedure described below.

Orders (or residual portions of orders) that originated frompass-through order flow source 7 that are not immediately matched bycrossing network 3 are typically forwarded to order router 9. Orderrouter 9 routes the orders to any of a plurality of externaldestinations 11 for execution. Examples of external destinations 11include DOT (used to communicate with the NYSE), other exchanges (suchas the Pacific Exchange or the AMEX), order management systems operatedby other financial institutions, ECNs (such as Island and Instinet) andATSs (such as POSIT). Order router 9 typically consists of softwareexecuting on a computer, designed using techniques well-known in theart, that receives non-matched, pass-through orders from crossingnetwork 3 and determines to which of external destinations 11 suchorders should be routed.

In an exemplary embodiment, orders from pass-through flow source 7 thatare not immediately matched remain in crossing network 3 for a period oftime during which a match may be found. The period of time such ordersmay remain in crossing network 3 may be selected by the entity placingthe order and may range from fractions of a second to any length of timedesired. If the specified time period has elapsed and no match for theorder is found, the order is routed to order router 9 for execution onany of external destinations 11.

Orders that originated from passive order flow source 5 may remain incrossing network 3 until a suitable match is found. Alternatively, suchorders may be cancelled after a period of time has elapsed and no matchhas been found by crossing network 3. The decision as to whether apassive order remains in crossing network 3 awaiting a match or whethersuch order is cancelled may be based on any suitable criteria including,but not limited to, the instructions of the entity or individual placingthe order.

Because in system 1 the orders from passive order flow source 5 and theorders from pass-through order flow source 7 are both sent to crossingnetwork 3, the total order flow entering crossing network 3 issubstantially greater than if only passive orders or pass-through ordersalone were sent to crossing network 3. As a result of the increasedorder flow exposure, the likelihood that, and the rate at which, any ofthe orders from passive order flow source 5 and pass-through order flowsource 7 are matched by crossing network 3 is greatly increased. Inaddition, because passive orders are not routed to external destinations11, the confidentiality of such passive orders is maintained.

Furthermore, because orders from passive order flow source 5 aretypically designated as “cross only” and “do not represent” orders,these orders must also be kept confidential even while they remain incrossing network 3 awaiting a match. To achieve this level ofconfidentiality, these orders are designated as “blind” orders whichprevents any trader, salesperson, customer or other order handlerassociated with the financial institution from being able to view suchorders while they are in crossing network 3. Thus, a trader can onlyview the trader's own orders from passive order flow source 5. In thisway, the financial institution's confidentiality obligations are metwhile increasing the total order flow entering through crossing network3. Furthermore, by designating orders from passive order flow source 5as “blind” orders, entities that desire their orders to remain secretare more willing to place such orders with a financial institution thatemploys system 1 thereby causing even a further increase in order flowinto crossing network 3.

Accordingly, system 1 increases the speed at which orders are executedwhile maintaining the confidentiality of any designated orders.

In addition to increasing the execution speed of orders, system 1 alsoimproves the price buyers and sellers receive for orders that arematched by crossing network 3. First, price improvement is achievedbecause the increased order flow into crossing network 3 results inbetter executions (i.e., lower price for buyer, higher price forseller). In addition, crossing network 3 matches buy and sell ordersusing a matching algorithm of the present invention that provides bothbuyers and sellers with price improvement.

Referring now to FIG. 2, there is shown a flowchart of the priceimprovement matching algorithm of the present invention that providesboth buyers and sellers with price improvement on trades matched bycrossing network 3. Initially, the method starts at Step 1 in which anew sell (buy) order is received by crossing network 3. Next, in Step 2,it is determined whether any buy (sell) orders exist in crossing network3 with which the new sell (buy) order may be matched. If no buy (sell)orders are in crossing network 3, the method continuously loops until asuitable buy (sell) order is received.

When crossing network 3 contains buy (sell) orders, in Step 3, one ofthe buy (sell) orders is selected as a potential match for the new sell(buy) order according to a selection priority scheme. Initially, the buy(sell) order having the highest (lowest) buy (sell) order price isselected for transacting with the new sell (buy) order. If there are twobuy (sell) orders that have the same buy (sell) order price, thenpriority is given to an agency order, i.e., an order a financialinstitution receives from a customer. If both orders are agency ordersor both orders are proprietary orders then priority is given to theorder that was first in time. In addition to the above priority scheme,it will be obvious to one of ordinary skill to use additional ordifferent criteria for selecting a buy (sell) order to match with thenew sell (buy) order.

Next, in Step 4, it is determined whether the buy order price and thesell order price are within the current NBBO range. If it is determinedthat the buy order price is greater than the national best offer price,then, in Step 5, the buy order price is reduced to the national bestoffer price. Similarly, if the sell order price of the new sell order isless than the national best bid price, then, in Step 5, the sell orderprice is increased to the national best bid price. By adjusting the sellorder price and the buy order price in such a manner, matches performedby crossing network 3 will not result in buyers paying more than thenational best offer or sellers receiving less than the national bestbid. Accordingly, buyers and sellers are guaranteed to receive a pricethat falls within the NBBO.

Next, in Step 6, it is determined if the buy order price of the selectedbuy order is greater than or equal to the sell order price of the newsell order. If the buy order price is in fact less than the sell orderprice, then the selected buy order is not a suitable match for the newsell order and the method returns to Step 2 in which another buy (sell)order is selected for matching the new sell (buy) order. If, however,the buy order price is greater than or equal to the sell order price,then the method proceeds to Step 7 in which a cross point is set at themidpoint between the buy order price and the sell order price. Bysetting the cross point to the midpoint of the buy order price and thesell order price, both the buyer and seller receive a price improvementover the original price of their orders.

Before crossing network 3 matches the buy order and sell order at thecross point, the method, in Step 8, determines whether there is anotherbuy (sell) order in crossing network 3 having a buy (sell) order priceat or above (below) the midpoint calculated in Step 7. If there is morethan one buy (sell) order in crossing network 3 having a buy (sell)order price at or above (below) the midpoint, then buy (sell) order thatis the next highest (lowest) to the selected buy (sell) order isidentified. If such another buy (sell) order exists, then, in Step 9,the cross point at which the buy (sell) order and the new sell (buy)order will trade is changed to the buy (sell) order price of the anotherbuy (sell) order plus (minus) an increment. The increment may be anyamount and will typically depend on the particular market andregulations governing such market. For example, a suitable increment maybe 1 tick which for New York Stock Exchange traded equities is one cent.In certain markets, regulations do not require the addition(subtraction) of an increment. In these cases, the cross point at whichthe buy (sell) order and the new sell (buy) order will trade is simplychanged to the buy (sell) order price of the another buy (sell) order.

Once the cross point is determined, a transaction between the buy (sell)order and the new sell (buy) order is performed by crossing network 3,as in Step 10. The transaction between the buy (sell) order and the newsell (buy) order will be for a number of shares that is the lesser ofthe number of shares included in the buy (sell) order and the new sell(buy) order. If there are more shares in the new sell (buy) order thanin the buy (sell) order against which the new sell (buy) order wascrossed, as is determined in Step 11, then the method returns to Step 2so that another suitable buy (sell) order may be selected to matchagainst the remaining shares of the new sell (buy) order. If, however,all the shares of the sell (buy) order have been matched in Step 10,then the method returns to Step 1 in which another new sell (buy) orderto be matched is received by crossing network 3.

To illustrate the price improvement selection method of the presentinvention assume that the national best bid is $50.00 and the nationalbest offer is $51.00. If crossing network 3 receives a sell order havinga sell order price of $50.10 and a buy order having a buy order price of$50.20, then crossing network will cross the buy order and sell order atthe midpoint between the buy order price and the sell order price—inthis case at $50.15. Thus, both the buyer and seller receive as priceimprovement a portion of the spread between the buy order price and thesell order price.

If the buy order price is $52.00 and the sell order price 50.90, becausethe buy order price is outside the NBBO range, the buy order price ischanged to the national best offer price of $51.00. Once the change ismade, crossing network 3 will cross the buy order and sell order at themidpoint between the changed buy order price and the sell order price—inthis case $50.95. Similarly, if the sell order price is $49.50, the sellorder price is changed to $50.00, the national best bid price, and thecross between the buy order and sell order occurs at $50.50.

If crossing network 3 receives a sell order having a sell order price of$50.00 and also receives two buy orders, a first of which having a buyorder price of $50.20 and the second of which having a buy order priceof $50.15, then according to the priority scheme used by crossingnetwork 3, the buy order having the higher buy order price—$50.20—willbe matched against the $50.00 sell order. As before, a cross point formatching the first buy order and sell order is calculated as themidpoint between the first buy order price and the sell order price—i.e.$50.10. In this case, however, the second buy order has a buy orderprice at the calculated cross point of $50.15 so the cross point atwhich the sell order and the first buy order are crossed is changed to$50.15 plus an increment, or $50.16.

If the first buy order received by crossing network 3 was a proprietaryorder having a buy order price of $50.20 and the second buy orderreceived was an agency order having the same buy order price of $50.20,then according to the priority scheme used by crossing network 3, theagency buy order takes precedence over the proprietary buy order and ismatched against the sell order at the midpoint of $50.10. If, on theother hand, both of the buy orders were either agency orders orproprietary orders, then the first buy order, being first in time, ismatched against the sell order at the $50.10 midpoint.

Referring now to FIG. 3, there is shown a flowchart of the priceimprovement matching algorithm according to an exemplary embodiment ofthe present invention. Elements that are similar to elements of theflowchart of FIG. 2 are similarly labeled and a detailed descriptionthereof is eliminated.

Whenever the NBBO changes, buy and sell orders contained in crossingnetwork 3 must be reevaluated to determine whether suitable matchesexist. Thus, the method starts at Step 31 in which an update to the NBBOis received. Next, in Step 32, it is determined whether buy orders andsell orders exist in the buy order book and sell order book,respectively, for matching by crossing network 3. If both buy orders andsell orders are not present, then the method continuously loops untilboth buy orders and sell orders are available. If buy orders and sellorders are both available for matching, then, in Step 33, a buy orderand a sell order are selected for matching according to the selectionpriority scheme described above. Once a buy order and sell order areselected, the method continues on to Step 4 to determine whether a tradebetween the buy order and sell order is feasible in a manner similar tothat described with respect to the flowchart of FIG. 2. Thus, crossingnetwork 3 examines existing orders for potential trades based on changesin the NBBO as well as based on new orders being received by crossingnetwork 3.

The flowcharts of FIGS. 2 and 3 describe a price improvement matchingalgorithm according to exemplary embodiments. Crossing network 3 mayalso be configured to match buy and sell orders using any otherdesirable matching algorithm. Furthermore, it will be obvious to one ofordinary skill based on the above to include in crossing network 3 othersuitable price improvement matching algorithms.

Accordingly, a system and method is provided in which buy orders andsell orders transact at increased execution speeds while offeringoverall improvement in the execution price each order receives andmaintaining the confidentiality of any designated order. Because insystem 1 of the present invention both passive orders and pass-throughorders are combined, the total order flow entering crossing network 3 issubstantially greater thereby increasing the likelihood that, and therate at which, orders are matched by crossing network 3. Also, becausepassive orders are not routed to external destinations 11, theconfidentiality of such passive orders is maintained. In addition toincreasing the execution speed of orders, the increased order flowthrough crossing network 3 may also improve the execution price buyersand sellers receive. Furthermore, execution price may be improved as aresult of the matching algorithm employed by crossing network 3 in whichthe spread between the buyer's buy order price and the seller's sellorder price is divided to provide both the buyer and seller with priceimprovement.

Based on the above description, it will be obvious to one of ordinaryskill to implement the system and methods of the present invention inone or more computer programs that are executable on a programmablesystem including at least one programmable processor coupled to receivedata and instructions from, and to transmit data and instructions to, adata storage system, at least one input device, and at least one outputdevice. Each computer program may be implemented in a high-levelprocedural or object-oriented programming language, or in assembly ormachine language if desired; and in any case, the language may be acompiled or interpreted language. Suitable processors include, by way ofexample, both general and special purpose microprocessors. Furthermore,alternate embodiments of the invention that implement the system inhardware, firmware or a combination of both hardware and software, aswell as distributing modules and/or data in a different fashion will beapparent to those skilled in the art and are also within the scope ofthe invention.

It will thus be seen that the objects set forth above, among those madeapparent from the preceding description, are efficiently attained and,since certain changes may be made in carrying out the above process, ina described product, and in the construction set forth without departingfrom the spirit and scope of the invention, it is intended that allmatter contained in the above description shown in the accompanyingdrawing shall be interpreted as illustrative and not in a limitingsense.

It is also to be understood that the following claims are intended tocover all of the generic and specific features of the invention hereindescribed, and all statements of the scope of the invention, which, as amatter of language, might be said to fall therebetween.

1. A computer-implemented method for matching a buy order having a buyorder price and a sell order having a sell order price with a systemcomprising one or more computer processors, said method comprising thesteps of: identifying with one of said computer processors an NBBO pricerange, said NBBO price range having a best offer price and a best bidprice; determining with one of said computer processors if said buyorder price and said sell order price are within said NBBO price range;determining with one of said computer processors if said buy order priceis not less than said sell order price; calculating with one of saidcomputer processors a midpoint between said buy order price and saidsell order price; and only matching with one of said computer processorssaid buy order and said sell order at said midpoint if said buy orderprice is not less than said sell order price and said buy order priceand said sell order price are within said NBBO price range.
 2. Acrossing system, comprising: a plurality of passive orders, wherein saidpassive orders include at least one order selected from the groupconsisting of: not held designated orders, cross only designated ordersand do no represent designated orders; a plurality of pass-throughorders, said plurality of passive orders and said plurality ofpass-through orders including buy orders and sell orders; a crossingnetwork, said crossing network receiving said plurality of pass-throughorders and said plurality of passive orders for matching said buy ordersand said sell orders; an order router in communication with saidcrossing network and with at least one external order destination, saidorder router receiving at least a portion of said pass-through ordersfrom said crossing network and forwarding said at least a portion ofsaid pass-through orders to said at least one external orderdestination.
 3. The system of claim 2, wherein said plurality of passiveorders are blind orders.
 4. The system of claim 2, wherein said at leasta portion of said pass-through orders includes orders that have not beenmatched by said crossing network.
 5. The system of claim 2, wherein aportion of said pass-through orders are forwarded to said at least oneexternal destination after a time delay.
 6. The system of claim 2,wherein one of said buy orders has a buy order price and one of saidsell orders has a sell order price, and wherein said crossing networkidentifies an NBBO price range, determines if said buy order price andsaid sell order price are within said NBBO price range, determines ifsaid buy order price is not less than said sell order price, calculatesa midpoint between said buy order price and said sell order price, andonly matches said one of said buy orders and said one of said sellorders at said midpoint if said buy order price is not less than saidsell order price and said buy order price and said sell order price arewithin said NBBO price range.
 7. The system of claim 6, wherein saidNBBO price range includes a best offer price, said buy order price isnot within said NBBO price range and said sell order price is withinsaid NBBO price range, and wherein said crossing network changes saidbuy order price to a changed buy order price that is equal to said bestoffer price, calculates a midpoint between said changed buy order priceand said sell order price, and only matches said one of said buy ordersand said one of said sell orders at said midpoint if said changed buyorder price is not less than said sell order price.
 8. The system ofclaim 6, wherein said NBBO price range includes a best bid price, saidsell order price is not within said NBBO price range and said buy orderprice is within said NBBO price range, and wherein said crossing networkchanges said sell order price to a changed sell order price that isequal to said best bid price, calculates a midpoint between said changedsell order price and said buy order price, and only matches said one ofsaid buy orders and said one of said sell orders at said midpoint ifsaid buy order price is not less than said changed sell order price. 9.The system of claim 6, wherein said NBBO price range includes a best bidprice and a best offer price and said buy order price and said sellorder price are not within said NBBO price range, and wherein saidcrossing network changes said buy order price to a changed buy orderprice that is equal to said best offer price, changes said sell orderprice to a changed sell order price that is equal to said best bidprice, calculates a midpoint between said changed buy order price andsaid changed sell order price, and matches said one of said buy ordersand said one of said sell orders at said midpoint.
 10. The system ofclaim 6, wherein said one of said buy orders is for a first share amountand said one of said sell orders is for a second share amount andwherein said crossing network matches said one of said buy orders andsaid one of said sell orders up to said first share amount if said firstshare amount is less than said second share amount and only matches saidone of said buy orders and said one of said sell orders up to saidsecond share amount if said second share amount is less than said firstshare amount.
 11. The system of claim 6, further comprising a second ofsaid buy orders having a second buy order price above said midpoint andless than said buy order price, wherein said crossing network calculatesa cross point equal to said second buy order price plus an increment andmatches said one of said buy orders and said one of said sell orders atsaid cross point.
 12. The system of claim 6, further comprising a secondof said sell orders having a second sell order price below said midpointand more than said sell order price, wherein said crossing networkcalculates a cross point equal to said second sell order price minus anincrement and matches said buy order and said sell order at said crosspoint.
 13. The system of claim 6, wherein each of said buy orders has abuy order price and wherein said buy order price of said one of said buyorders is greater than said buy order price of any other of said buyorders.
 14. The system of claim 6, further comprising a second of saidbuy orders having a second buy order price equal to said buy order priceof said one of said buy orders and wherein said one of said buy ordersis an agency order and said second of said buy orders is a proprietaryorder.
 15. The system of claim 6, further comprising a second of saidbuy orders having a second buy order price equal to said buy order priceof said one of said buy orders, wherein said one of said buy orders isan agency order having an order time and said second of said buy ordersis an agency order having a second order time and wherein said ordertime is prior to said second order time.
 16. The system of claim 6,further comprising a second of said buy orders having a second buy orderprice equal to said buy order price of said one of said buy orders,wherein said one of said buy orders is a proprietary order having anorder time and said second of said buy orders is a proprietary orderhaving a second order time and wherein said order time is prior to saidsecond order time.
 17. The system of claim 6, wherein said crossingnetwork receives an updated NBBO price range.
 18. A computer-implementedsystem for matching a buy order having a buy order price and a sellorder having a sell order price, comprising: at least one computerprocessor adapted to: identify an NBBO price range, said NBBO pricerange having a best offer price and a best bid price; determine if saidbuy order price and said sell order price are within said NBBO pricerange; determine if said buy order price is not less than said sellorder price; calculate a midpoint between said buy order price and saidsell order price; and only match said buy order and said sell order atsaid midpoint if said buy order price is not less than said sell orderprice and said buy order price and said sell order price are within saidNBBO price range.